“I’ve failed over and over again in my life, and that is why I succeed.”
Michael Jordan
Russ Koesterich, CFA
Chief Investment Strategist and Head of the Model Portfolio & Solutions Business
Weekly Commentary Overview
- Stocks struggled last week, and once again the losses were most pronounced in the United States.
- Financial markets remain highly volatile, with violent swings in the oil price and interest rates adding to the angst.
- With the Fed likely to start removing monetary accommodation, 2015 was bound to be a more volatile year than last.
- But more volatility doesn’t mean less opportunity for investors. For now, we believe a combination of international equities and credit offer the best relative value.
- We also believe oil prices are approaching a bottom.
Volatility and Violent Swings
Stocks struggled last week, and once again the losses were most pronounced in the United States. The Dow Jones Industrial Average lost 2.87% to close the week at 17,164, the S&P 500 Index fell 2.73% to 1,995, and the Nasdaq Composite Index declined 2.56% to 4,635. Meanwhile, the yield on the 10-year Treasury dropped sharply from 1.79% to 1.67% as prices correspondingly rose.
Financial markets remain highly volatile, with violent swings in the oil price and interest rates adding to the angst. For now, we believe a combination of international equities and credit offers the best relative value. We also believe oil prices are approaching a bottom.
Uneven Earnings Put Pressure on Stocks
While U.S. equities are down for the year, stocks in Japan, Europe and even emerging markets have all seen gains. Part of the problem is that the stronger dollar is beginning to hurt the earnings of large-cap U.S. companies. Apple was a notable exception, posting a stellar quarter thanks to surging iPhone sales, but the negative impact of a stronger dollar has been evident in the earnings of a number marquee companies, including Procter & Gamble, United Technologies, Microsoft and Caterpillar.
Eventually, the benefits of cheaper energy may offset the impact of a stronger dollar and lower oil prices. Indeed, the fall in gasoline prices is starting to support household spending: During the fourth quarter, personal consumption rose at an annualized rate of 4.3%, the fastest pace since the first quarter of 2006.
We believe it makes sense to look outside the U.S. for value. European equities are up around 6.5% year-to-date and are benefiting from the European Central Bank’s quantitative easing, as well as stabilization in economic indicators and improvements in lending.
Yields and Oil Prices: How Low Can They Go?
With stocks remaining under pressure, investors continued to favor Treasury debt, causing interest rates to grind lower (as prices rose). Last week, the yield on the 10-year U.S. Treasury note broke below 1.70%, the lowest level since the spring of 2013. U.S. rates continue to be suppressed by a combination of persistently low supply of U.S. bonds and even more paltry yields in Europe and Japan. With yields down, investors are exploring other parts of the bond market that offer the prospect of higher income. After selling off sharply in December, high yield bonds have stabilized, with the asset class gathering more than $1 billion in fund flows last week.
Yields fell even after the Federal Reserve (Fed) upgraded its assessment of U.S. economic growth to “solid,” while in the same statement acknowledging the significance of international conditions and soft inflation. The Fed faces a difficult balancing act: trying to reconcile the competing trends of a strong U.S. labor market with a soft global economy and declining inflation expectations. Nonetheless, we still believe the Fed will increase interest rates at either its June or September meeting.
The other notable development last week was Friday’s reversal in oil prices. Crude prices pushed lower for most of last week, with markets hit by the news that U.S. commercial crude inventories (excluding the Strategic Petroleum Reserve) rose to over 406 million barrels, the highest level for this time of year in at least 80 years. However, prices reversed sharply on Friday. Lower oil prices are starting to have a dramatic impact on the behavior of energy companies. For example, Shell just announced a $15 billion cut in capital expenditures and the overall number of horizontal U.S. rigs has collapsed by over 200 in just the last two months. A slowdown in future exploration and production should lead to stabilization in oil prices.
Where We See Value
With the Fed likely to start removing monetary accommodation, 2015 was bound to be a more volatile year than last. But more volatility doesn’t mean less opportunity for investors.
We believe it makes sense to look outside the U.S. for value. European equities are up around 6.5% year-to-date and are benefiting from the European Central Bank’s quantitative easing, as well as stabilization in economic indicators and improvements in lending. Japan’s market also rose last week, aided by a slight decrease in the jobless rate and a pickup in industrial production. Going forward, Japanese stocks should be supported by relatively cheap valuations and rising dividends.
Unsurprisingly, energy stocks are trading well below last year’s highs, but choose carefully. We would favor the large, integrated oil companies, which we expect should benefit from any stabilization in the price of crude. In fixed income, with yields continuing to grind lower, it is hard to suggest that investors embrace U.S. Treasuries, unless you believe the global economy is about to enter a period of deflation, which we think is unlikely. Instead, we would prefer tax-exempt municipal bonds, as well as U.S. high yield debt.
A Change is Gonna Come
For the last six years, fixed income investors have been rewarded for reaching for yield amidst low volatility. Jeff Rosenberg explains why the good run might end in 2015.
READ FULL REPORT
The Outlook for and Impact of Lower Oil Prices
I am actively looking to build relationships with Real Estate Investors and Owner / Users for Phoenix – Scottsdale – Tucson – Maricopa County – Pima County – Pinal County – Cochise County – Santa Cruz County –Yavapai County – Gila County – Arizona , USA
Walter Unger CCIM – walterunger@ccim.net – 1-520-975-5207 – http://walter-unger.com
1
Timeline of Phoenix, Arizona history
http://en.wikipedia.org/wiki/Timeline_of_Phoenix,_Arizona_history
2
http://en.wikipedia.org/wiki/Phoenix,_Arizona
3
Facts of Arizona – year 1848 to 2013
http://walter-unger.com/?p=9507
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix.
1-520-975-5207
View my listings and my profile at:
http://www.loopnet.com/profile/14101172900/Walter-Unger-CCIM/Listings/
Investors and owner/users need to really know the market before making a move in commercial investment properties as the market has a lot of moving parts today. What’s going on socio-economically, what’s going on demographically, what’s going on with location, with competing businesses, with public policy in general — all of these things affect the quality of your commercial properties/investment properties. Therefore, you need a broker who understands commercial properties. Please go to my web-site and get all the newsflashes and updates in Commercial Real Estate.
Check out my professional profile and connect with me on LinkedIn.
Follow me on Facebook:
http://www.facebook.com/ungerccim
Follow me on Twitter:
https://twitter.com/Walterunger
Follow Me on Google+
https://plus.google.com/u/0/b/114560883588623379451/
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years. I am also a commercial land specialist in Phoenix and a Landspecialist in Arizona. If you have any questions about Commercial / Investment Properties in Phoenix or Commercial / Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us.
Please reply by e-mail walterunger@ccim.net or call me on my cell 520-975-5207 or Office:480-948-5554
Thank You
Walter
Walter Unger CCIM
Associate Broker, West USA Commercial Real Estate Advisers
7077 E. Marilyn Road, Bldg 4, Suite 130
Scottsdale, AZ 85254
Cell: 520-975-5207
Office : 480-948-5554
Fax: (480-658-1172
View my listings and my profile at:
http://www.loopnet.com/Profile/14101172900/Walter-Unger-CCIM/
a little about me and my expertise – video
commercial-investment real estate adviser-land specialist
https://www.youtube.com/watch?v=PPs3kpKR4nY
Delivering the New Standard of Excellence in Commercial Real Estate
- Commercial Real Estate Scottsdale
- Commercial Real Estate Phoenix
- Commercial Real Estate Arizona
- Commercial Investment Properties Phoenix
- Commercial Investment Properties Scottsdale
- Commercial Investment Properties Arizona
- Land Specialist Arizona
- Arizona Land Specialist
- Land Specialist Phoenix
- Phoenix Land Specialist
- Land For Sale Phoenix
- Land for sale Arizona
- Commercial Properties For Sale Phoenix
- Commercial Real Estate Sales Phoenix
- Commercial Properties Phoenix
- Commercial Properties Arizona
- Commercial Land Specialist Phoenix
- Commercial Land Phoenix
- Multifamily land Phoenix
- Retail Land Phoenix
- Industrial Land Phoenix
- Land Commercial Phoenix
- Land Retail Phoenix
- Land Industrial Phoenix
- Land Multifamily Phoenix
- Industrial Land for sale Phoenix
- Land Industrial
- P
- Investment Real Estate
Disclaimer of Liability
The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.